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Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach

This article assesses the effects of internal and external factors on the profitability of Jordanian commercial banks. A panel data set of thirteen commercial banks between 2000 and 2018 was used. Pooled ordinary least squares, random and fixed models were applied. Moreover, a Hausman test was perfo...

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Main Authors: Bekhet H.A., Mohammad Alsmadi A., Khudari M.
Other Authors: 37100908800
Format: Article
Published: Sciedu Press 2023
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spelling my.uniten.dspace-252032023-05-29T16:07:19Z Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach Bekhet H.A. Mohammad Alsmadi A. Khudari M. 37100908800 57219966640 57211608540 This article assesses the effects of internal and external factors on the profitability of Jordanian commercial banks. A panel data set of thirteen commercial banks between 2000 and 2018 was used. Pooled ordinary least squares, random and fixed models were applied. Moreover, a Hausman test was performed to confirm the suitability of models, which was preferred on the random effect model. Also, a Wooldridge test for serial correlation and a modified Wald test for groupwise Heteroskedasticity were used and both of their null hypotheses were rejected. However, to deal with these problems, a robustness analysis was performed using feasible generalized least square. The findings suggested that internal factors and in particular, bank size and diversification, had positive effects on bank profitability, while credit risk, operational risk and leverage risk were negatively related to bank performance. However, capital risk had a positive but insignificant impact on bank profitability. As for the effect of external factors, the results suggested that financial development and inflation had a positive and significant impact on bank profitability, while market concentration and stock market volatility had a significant negative effect on bank profitability. Further, a negative and insignificant impact were found for GDP and refugee crisis on bank profitability in Jordan. The findings would help managers of commercial banks, investors, government, policy makers and shareholders to make better decisions and improve performance by highlighting areas of weaknesses. In general, policy makers should become more aware with these insights on profit determinants in Jordanian commercial banks. � 2020 Final 2023-05-29T08:07:19Z 2023-05-29T08:07:19Z 2020 Article 10.5430/ijfr.vlIn5p359 2-s2.0-85096302125 https://www.scopus.com/inward/record.uri?eid=2-s2.0-85096302125&doi=10.5430%2fijfr.vlIn5p359&partnerID=40&md5=83bc116f940c185ea418a58240067e75 https://irepository.uniten.edu.my/handle/123456789/25203 11 5 359 375 Sciedu Press Scopus
institution Universiti Tenaga Nasional
building UNITEN Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Tenaga Nasional
content_source UNITEN Institutional Repository
url_provider http://dspace.uniten.edu.my/
description This article assesses the effects of internal and external factors on the profitability of Jordanian commercial banks. A panel data set of thirteen commercial banks between 2000 and 2018 was used. Pooled ordinary least squares, random and fixed models were applied. Moreover, a Hausman test was performed to confirm the suitability of models, which was preferred on the random effect model. Also, a Wooldridge test for serial correlation and a modified Wald test for groupwise Heteroskedasticity were used and both of their null hypotheses were rejected. However, to deal with these problems, a robustness analysis was performed using feasible generalized least square. The findings suggested that internal factors and in particular, bank size and diversification, had positive effects on bank profitability, while credit risk, operational risk and leverage risk were negatively related to bank performance. However, capital risk had a positive but insignificant impact on bank profitability. As for the effect of external factors, the results suggested that financial development and inflation had a positive and significant impact on bank profitability, while market concentration and stock market volatility had a significant negative effect on bank profitability. Further, a negative and insignificant impact were found for GDP and refugee crisis on bank profitability in Jordan. The findings would help managers of commercial banks, investors, government, policy makers and shareholders to make better decisions and improve performance by highlighting areas of weaknesses. In general, policy makers should become more aware with these insights on profit determinants in Jordanian commercial banks. � 2020
author2 37100908800
author_facet 37100908800
Bekhet H.A.
Mohammad Alsmadi A.
Khudari M.
format Article
author Bekhet H.A.
Mohammad Alsmadi A.
Khudari M.
spellingShingle Bekhet H.A.
Mohammad Alsmadi A.
Khudari M.
Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach
author_sort Bekhet H.A.
title Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach
title_short Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach
title_full Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach
title_fullStr Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach
title_full_unstemmed Effects of Internal and External Factors on Profitability of Jordanian Commercial Banks: Panel Data Approach
title_sort effects of internal and external factors on profitability of jordanian commercial banks: panel data approach
publisher Sciedu Press
publishDate 2023
_version_ 1806427589370183680
score 13.211869

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